Florida’s Citizens’ Gilway: Private vs. Public Sector Management

Barry Gilway is president of Florida’s state-run property insurer, Citizens Property Insurance Corp. He is the first head of Citizens who comes solely from the private sector. In the following excerpts from a recent interview with Insurance Journal’s Michael Adams, Gilway addresses the differences between managing in the private and public sectors and the depopulation ideas he has for Citizens. The complete interview may be read on Insurance Journal’s website.

You are the first head of Citizens who comes solely from the private sector. What is your view of the public versus private sector?

I’ve been involved in executive level positions in four different insurance companies over 42 years and I’ve held four different CEO positions in those companies. This, however, is my first real exposure operating in public environment and I have limited history working with legislatures or really reporting with a Cabinet or interfacing with officials in the state government.

One of obvious differences and the most glaring is that clearly in the public space you’re under a microscope. Every single move you make, every single action you take, every single comment you make is scrutinized in the press. It is considered by legislators and most importantly interpreted by the public. There is a huge difference and you have to be so much more aware, so much clearer in your communication while operating in public.

The second distinction, which is a key issue, is the expense component. While as CEO of a private company it was obviously necessarily to report to international executives in the case of Zurich or a local board in the case of Zurich Canada. I had to do extensive work developing budgets and budget variances. But I certainly was not scrutinized to the extent we are at Citizens down to individual expense account level. My experiences in private-run operations were to the bottom line and how we got there. In the case of Citizens, not only are you scrutinized in the case of the objective, you are scrutinized over the actions you take to get to that objective.

Recently, there has been an outcry over travel expenses of top Citizens executives. What is your view on the issue?

Look, there is always a focus in the private sector on expense. But I would say the standards are different and the application of standards is different. Now, what do I mean by that? At Zurich if you are an executive vice president you fly first class, you don’t fly coach. At Citizens, it doesn’t matter if you are flying to Miami, it doesn’t matter if you are flying to London, you are flying coach. Is that right? Yes it is; you are spending taxpayer money and you need to practice solid fiduciary responsibility.

The other issue frankly, is the type of expenses that are considered appropriate. There is a lack of understanding or at least a lack of admission to the fact that when you travel internationally, the costs go up astronomically.

People must understand that if we are going to operate in the international marketplace, if we are going to take the position we have established to come up with the best deal that we possible can for the taxpayers of Florida, we have to reach out beyond Florida, and go out to the financial centers of this world and meet with the top reinsurers and the top capital markets to get the best job done. But there is a high cost associated with that. But the payback is absolutely enormous. For example, the two examples that jump out at me is that Sharon Binnun’s trip to New York, London, Zurich, and Bermuda, that saved us 2.41 percent or $18 million in a time when standard risk transfer costs were going up. We were able to get those costs low, which was very unusual in the risk transfer arena. Even more compelling was the trip to London and Bermuda that produced like 3.85 percent savings at like $28.9 million on the standard $750 million risk transfer.

I get emotional about it because I see the effort and I see the dedication that is made by the Sharron Binnuns of this world and the key team and they are making this unbelievable effort on the part of Citizens and taxpayers to reduce assessments, transfer risks, and now they are subject to criticism for doing so.

Citizens is placing an emphasis on depopulation. How do you win the public’s trust?

One of the concerns I have looking at history is that we shouldn’t be depopulating if we are not moving this business to financially secure companies. So companies that are participating in the larger plans we have an obligation to make sure that in addition to Office of Insurance Regulation review that they are companies that can sustain this business and are financially secure enough to underwrite the number of accounts that are being proposed to be depopulated.

The other aspect really goes back to my comment on communication. We are looking closely at the current take-out process and how to refine the communication of that process.

We have a job to do communicating to the general public and especially Citizens policyholders regarding the advantages of a take-out.